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The status quo would collapse were systemic fraud and complicity banished. Rather than the acts of evil conspirators, they have become the foundation of the U.S. economy and financial system.

Though fraud and complicity are presented in the mainstream media as isolated conspiracies outside the status quo, the truth is that the status quo is now entirely dependent on fraud and complicity for its very survival. Every level of the status quo would immediately implode were fraud and complicity suddenly withdrawn from the system.

How is this true? Let me count the ways.

1. The mortgage market. As I reported recently in this Daily Finance story, the private market for mortgage-backed securities is dead. Now that we all understand the entire mortgage is not just riddled with fraud and misrepresentation of risk, but it is entirely dependent on fraud and misrepresentation of risk to function, no one is willing to touch any of this debt--except if it is guaranteed by the Federal government (and thus by its taxpayers).

Now that the systemic fraud and misrepresentation of risk have been exposed, the $10 trillion mortgage market has ceased to function except as a dumping ground where private players can dump 100% of their losses on the taxpayers (profits were privatized, losses are socialized).

2. Foreclosures and our Banana Republic system of "law". There are two sets of laws (and two sets of books) in status quo America: one set of laws for "too big to fail" banks and Wall Street, and one for the rest of us peons.

3. Housing and commercial real estate (CRE). Does anyone seriously think housing is recovering from organic demand? Does anyone seriously think housing wouldn't fall off a cliff if the Central State withdrew its collusive propping-up of the real estate market?

5. The stock market. As I outlined in Dependency, The Fed and the Market (November 8, 2010), the stock market would roll over and crater without constant intervention and manipulation by the Federal Reserve and other Power Elite/Central State agencies.

Astute reader Russ R. and Zero Hedge pointed me to this interview with Jeremy Grantham in which he rightly identifies the Fed's goal as controlling the economy rather than the money supply, and the Fed's only avenue for this manipulation is the "wealth effect" which it believes is triggered by a rising stock market.

In essence, the Fed is counting on an illusion of temporary wealth to ignite a firestorm of new borrowing and spending. Unfortunately for the Fed, 90% of American households don't own enough financial assets to feel even the illusion of newfound wealth, and those that do have been burned twice this decade when all that "wealth" in stocks vanishes (NASDAQ down almost 80% in 2000-02, S&P 500 down 45% from October 2008 to March 2009).

6. Corporate accounting. With pro-forma earnings, off-balance sheet assets, derivatives booked as "mark to fantasy," much of Corporate America's accounting is dependent on fraud and misrepresentation of risk to plump up the all-important quarterly earnings.

(The present) state is marked by the rise of the pygmy leader, the sovereign as dolt, the CEO as figurehead that knows little, who has no real need of knowing. It is in this gimlet-eyed tone that Hegel should be read when he says that "no reference to particularity of character" is necessary in the leader of an advanced state or in this case, large bank in an advanced money economy. Hegel continues:

"In a completed organization we have to do with nothing but the extreme of formal decision, and that for this office is needed only a man who says 'Yes,' and so puts the dot upon the 'i.' The pinnacle of state must be such that the private character of its occupant shall be of no significance."

What is known in the literature as "moral hazard" creates an ecology that results in moral lassitude rather than evil. Thus our bankers are no robber barons, no blood suckers, but rather "dot the i" dolts, and at their best, their very best, they are performers who pantomime what a leader should look like in order to "dot the i" or appear to

I think that sums up the foreclosure crisis, the banks, the courts, the regulatory agencies, Wall Street, the Fed, the Treasury, and the rest of the Political Class.

When a system becomes dependent on fraud and misrepresentation of risk for "business as usual," then all that is required of the complicit is to "dot the i's" and fill out the report, court order, balance sheet, act of Congress, etc., just like everyone else does.